APA Group
chairman
Len Bleasel
has made it clear he isn’t going to be pressured into making a higher offer for gas distributor
Envestra
, even though the market overwhelmingly expects it.

With a thorough knowledge of Envestra through its operating contract for its assets, and no other bidder in sight, Mr Bleasel is standing firm.

“We know and understand it well enough to put in what we believe is the right and appropriate offer," he told The Australian Financial Review after APA’s annual shareholder meeting in Sydney.

“If the expectations are greater or far greater than that – well, it won’t ­happen."

Action on APA’s non-binding scrip-based offer for the rest of Envestra it doesn’t already own has gone quiet since the target knocked it back in early August, saying it “significantly undervalues" Envestra for a change-of-control deal.

Interest still strong

Mr Bleasel has been happy to bide his time, getting first annual results out of the way and now the AGM.

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“It’s an asset that we’ve had our eye on for a long time," Mr Bleasel said.

“We haven’t given up."

At the same time he describes it as a “like-to-have asset, not a must-have" and says APA would be happy to sit with its current 33.3 per cent stake if necessary.

“We’re already sitting comfortably at 33 and a third and we are operating and managing. There is no rush to do the rest of it.

“We just thought it was in the best interests of the two groups of shareholders to put it all together."

APA’s scrip-based proposal of 0.1678 of its shares for each Envestra share, originally valued Envestra at $1.10 per share, including a 3¢ per share ­dividend.

At the closing prices on Thursday, the value of the offer was about $1.03, including the dividend, which has been paid. Envestra shares closed at $1.115.

Regulatory proposal

Mr Bleasel pointed to a recent regulatory proposal that also went against any higher valuation for Envestra.

He said the draft guideline from the Australian Energy Regulator proposing changes in rates of return for regulated assets would reduce the valuation of all such businesses, including the gas distributor.

But while playing down the chances of an imminent move forward, Mr Bleasel is clearly wanting some resolution in the not-too-distant future.

“Maybe when the AGMs are out of the way people may say we now need to look at where we’re at. And we’re looking at other things. We won’t be sitting around for ever; we need to get on with our life," he said.

Mr Bleasel and APA managing director
Mick McCormack
are non-committal about the talks that have taken place with Envestra’s next-largest shareholder,
Cheung Kong Infrastructure
.

“They are very aware of what we’ve offered," Mr McCormack said.

Both point to several other growth opportunities available to APA, including the expected sale of gas pipelines connected with the Queensland LNG projects, the proposed new gas pipeline to
Rio Tinto
’s Gove alumina refinery, and longer-term ambitions to link the Northern Territory gas pipelines system into the national grid.

APA forecast an increase in earnings before interest, tax, depreciation and amortisation of 11-13 per cent this financial year. Dividends should be at least on a par with last year.